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Venezuela: The Shape Of Things To Come

Venezuela’s famine is a tough issue. United States pundits are quick to force their own political ideology on the situation, using it to make talking points to support what they already believe. But complex problems do not have simple causes, and when we really analyze what is happening, Venezuela becomes a frightening sign of things to come to every industrial country.

Dangers of top-down socialism

As American media reports on the famine, the first (and usually only) thing reported is the failure of socialism. In gloating tones, right-wing magazines and news organizations celebrate the failure of socialism in the Western hemisphere, winning the information war against liberal and left-wing organizations. While Venezuela’s socialist policies are certainly a cause of the famine, a more nuanced view is necessary.

What Venezuela teaches us is the dangers of top-down socialism. Contrary to popular belief, socialism does not necessarily imply a vanguard government forcing socialist policies on the people. Many socialist traditions, such as libertarian socialism advocated by Noam Chomsky, recognize that socialism can only work if the institutions start on local levels and then reach up to the government. For example, Venezuela nationalized a large part of its agricultural sector, which helped lead to the famine. This directive came from the executives of the country, rather than the farmers organizing worker co-ops on their own. Time and time again we have seen that when socialism does not start with the people, then it will failure.

Which brings us to the biggest cause of the famine in Venezuela: fixed price ceilings. Over the past few years, Nicolas Maduro’s government has gone down the road of fixing currency exchange rates. Since Venezuela’s economy relies on oil profits, this has allowed the government to make more money from their imports and exports. Just from this policy we can see that Maduro’s government is not truly socialist, but rather state-capitalistic. They are still trying to make money, but they are doing so while implementing socialist policies from the top.

Here is the description from a native Venezuelan about how fixing the exchange rate wrecked the economy:

However, if private industry can’t obtain foreign currency, then it can’t import goods. This is a huge problem in an import dependent country like Venezuela. On top of this, the discrepancy between official and unofficial exchange rates creates its own unique phenomenon not so different from Dutch Disease. Importers are given an incentive to not actually import anything. A great example of this was a once rampant scam known as the carousel. Popular back in the late 2000s, the scam involved an importer applying for foreign currency at one of the government’s preferential rates, then importing a load of the product (such as medical supplies). However, the supplies were never unloaded. Instead, they remained inside the freight truck, and were again exported. Meanwhile, the importer sold their foreign currency allocation on the black market for a nice profit. The importer then applied for more foreign currency to purchase more medical supplies, and drove their freight truck across the border yet again. Under this scheme, the importer made far more money than they ever could through legitimate business activities by simply buying foreign currency cheap from the government and selling it at a higher rate on the black market. Source

Two things stand out. 1) The government decided to artificially set the exchange without recognizing that the rest of the world would still continue business as usually. Once again, the top down socialist policies were implemented without clear understanding of the effect on the people. 2) It is nearly impossible to run a socialist economy in a capitalistic world. Venezuela tried to run its own economy, but world economic hegemony forces them to still do business with governments running their economies in a different way.

So although Venezuela socialism has failed, it is clear that the actual situation is far more nuanced than right-wing pundits point out.

Collapsing oil economies

A huge aspect (and alarming portent for the future) of this issue is the collapse of oil economies. For years Venezuela has sustained itself by the oil industry, which allowed the top-tier of the country to get extremely rich.

(Once again, we need to ask ourselves, if this is really a socialist country when the upper class of the country universally profits from selling and trading commodities.)

Over the past few years, oil-rich countries have suffered the ill-winds of economy, as the oil prices waxed and waned erratically. Oil is not a guaranteed market, and Venezuela has gotten hit the worst.

Oil rich countries must focus most of their economy on the oil industry to stay afloat, and Venezuela, which has 20.2% of the oil reserves in the world, found themselves in a situation where they neglected other industries to continue the flow of foreign money into the country. We see here that it is actually run-away, oil-fueled capitalism that contributed to these problems, as Venezuela focused its economic efforts on the industry that would make them the most money. The same Venezuelan as above described the problem:

…unlike the Perestroika era USSR, this scarcity of consumer goods has little to do with low productivity… Venezuelans have been importing most of their food and other consumer products since the 1970s. This reliance on imports wasn’t caused by socialist policies, but by some very basic rules of the capitalist market…. In Venezuela’s case, a booming oil industry meant other sectors of the economy like agriculture have long been neglected. Generations of Venezuelans have avoided this problem by simply importing everything they need from abroad.

Can we really act surprised that a country who long neglected agricultural in favor of the oil industry is not facing a famine? Combining the oil focus with the price-fixing policies has lead to a sharp decrease of import goods, causing famine.

This is a frightening portent of the future. If one country fueled by oil can collapse, how safe are other countries like Saudi Arabia or other gulf states? As our oil addiction becomes more profound, and the results of oil economies more catastrophic, Venezuela acts as a clear indicator of the damage the world has done to itself by refusing to invest in alternate energy sources.

Smuggling/Anti-governmental sources

As more studies emerge about why the shortages are happening, frightening revelations have come forward. First is the prevalence of smuggling in Venezuela, which admittedly is a symptom of the shortages and not the cause. However, with as much as 10% of goods flowing out of Venezuela through illegal smuggling operations, efforts to stop the shortages are becoming impossible.

There is also some speculation that anti-governmental forces and forces within the government are contributing to severity of the shortages.

TeleSUR has recently reported on the possibility of anti-government forces hording food supplies. While TeleSUR is not the most reliable news network (due being based in Venezuela), they also have reporters from five other countries, lending some credibility to their claims. Recently, they have reported finding bags of rice, sugar, and other foods hidden underground, supposedly by anti-government organizations. A healthy dose of skepticism is necessary here (who knows how much of the reporting is correct or how wide-spread such actions are), but this provides a frightening explanation for why the food shortages are so bad.

A more compelling picture of anti-government meddling is brought forward by Veneuzlan analysts:

First, several of the missing products have not been regulated since 2010, and among those that are regulated, the government has raised prices in an effort to incentivize distributors several times recently, but this has not resulted in increased availability. Second, the shortages began to intensify in 2013, before oil prices plummeted and while dollars were still readily available. Even once oil prices dropped and dollars became less available, the government continued to prioritize dollars for food import, and by their own accounting, the production levels of Venezuela’s major food companies have been stable or have even increased in that time. Curcio also found a correlation between intensity of food shortages and politically important moments, such as the lead-up to elections. Could it be that the shortages are manufactured? Many food sovereignty activists see it as no coincidence that Polar, the country’s largest food company, responsible for many of the items missing from shelves, is owned by a well-known member of the political opposition to the government.

United States interventions

We must also look at United States interventions into Venezuela. Throughout the 20th century and into the 21st century, the United States has persued an aggressive foreign policy in Central and South America. While American policy in the region does not make the news as often as flashy Middle Eastern stories, most United States citizens are at least of aware of the destructive US interventions in Nicaragua under the Clinton administration or the long standing sanctions against Cuba.

But the United States has had its hand meddling with Venezuelan affairs through most of the 21st century.

Throughout the Bush presidency, the White House funded and supported anti-government forces in Venezuela with the hope of destabilizing the country enough to remove Chavez from the presidency. We do not know the full extent of United States meddling in Venezualan affairs during the Bush presidency, but by looking at how effective the United States has been in destabilizing other countries such as Nicaragua, Honduras, or El Salvador it is a fair to assume that some of Venezuela’s economic woes were influenced by United States policy during the Bush years.

Policy has been more open under the Obama administration, but has remained equally invasive. Under the guise of “promoting democracy”, Obama has declared Venezuela a threat to national security. He was never clear exactly why Venezuela poses such a threat, besides the implication that any government the United States does not approve of is a de facto threat to the American way of life. Obama’s administration has targeted Venezuela with more precise sanctions than other countries, but giving the alarming lack of transparency of the Obama administration, we will not know how much he has meddled with the Venezuelan government and contributed to the food shortage.

Climate Change

A final aspect of the shortages is the role of climate change, which shockingly goes unreported in most media. In 2009 Venezuela experienced an abnormal El Niño, which in turn triggered a drought that it has never quite recovered from. This follows the trend of droughts that many countries are facing, whether because of abnormal weather patterns or long-term climate effects. Certainly we would expect that a country experiencing a drought would also have issues with the food shortages.

Along with the drought comes electricity issues. Venezuela gets a lot of its electricity from hydroelectric energy, most of which comes from only one dam. With dropping water levels, there is less power and the Venezuelan infrastructure is reaching a point of collapse. While not the main reason for the shortages, this is certainly an aspect of it, and should be a warning to all other industrial nations.

Conclusion

There is not one reason for Venezuela’s shortages. Trying to offer a simple answer to a complex problem will never work, so making blanket claims about anti-government opposition or the failure of socialism are both equally faulty. Rather, Venezuela finds itself caught in a perfect storm, with multiple issues wrecking the country. In the short-term, we should expect a new government to take control of Venezuela, moving it more in a centrist direction than it currently is.

What lessons can the United States take from Venezuela’s plight? First, we need to recognize that socialist policies can not be implemented without careful planning and without first establishing them at local and state levels before forcing implementation at federal levels. Secondly, socialism and capitalism do not mix. We can not expect that state-run capitalism will help our country any better that corporate capitalism. Looking at you ACA. Third, we need to start taking climate change seriously and realize the fragility of United States infrastructure, especially in the face of natural disasters and long-term climate trends.

Venezuela is in a terrible situation, but it is mostly horrifying because it shows the shape of things to come. Oil rich countries are starting to collapse. Our world is getting to the point where oil addiction is now longer feasible in the long-term. As Venezuela suffers, we need to take a hard look at ourselves, and make sure that this does not happen here.

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One response to “Venezuela: The Shape Of Things To Come”

Wow! I am amazed how fast you put this together. You really are talented. I remember taking a class that emphasized how most disasters are a combination of things that come together to create tragedy. Your article seems to back that up. I must really suck at research because I haven’t been able to uncover anywhere near this much info on my own. This is awesome knowing a writer who takes requests!

I am wondering if you are optimistic at all about our future? Our supply chain of food seems to be so fragile. When I was younger I liked going on disaster relief efforts, mostly hurricanes and tornadoes. Andrew and Katrina were the absolute worst, like Hell on earth. The food disappears so quickly and many people turn into animals almost overnight. The same guy who says “please” and “thank you” and holds the door open for you, is ready to beat you down for some water. These are relatively short term shortages. Can you imagine how bad things would get if climate change created long term shortages? It makes me shudder. It’s enough to make one become a “prepper”. I have often heard that Mormons practice storing food for future emergencies. Do you engage in this practice?

I have a cousin who is extremely bright. When he was a young attorney right out of law school he actually worked for Hillary at the Rose Law Firm in Little Rock. He now works for the oil industry in Texas. When I saw him at my Mother’s funeral back in June, he was talking about how many oil related businesses are filing for bankruptcy. His theory is that Saudi Arabia and others are keeping oil prices low on purpose to hurt oil producing nations and businesses.

Thanks Zachery. I plan on reading this multiple times. I have read it twice now and get more out of it each time.